Stock of the day: BASF

This Thursday we’re analysing a company that we mention often, the German BASF. Last time we analysed this stock in mid-January we were bullish:

“In addition, the price was correcting inside of the big wedge pattern (red lines), or a bit smaller wedge with the upper blue line. Both of the resistances were broken, which along with the false breakout gave a green light for buyers. This particular optimism here, along with the general positive sentiment on stocks right now is more than enough for us to be bullish on BASF. Our sentiment will be changed into a negative one, when the price drops below the up trendline but chances for that are now rather limited.”

Well, it worked out pretty well but not exactly expected. Yes, the price was higher the next month but the rise was not spectacular. In the second half of February there was a drop , which actually changed the long-term technical situation a lot.

What you can see on the weekly chart is a long-term failed inverse head and shoulders pattern (blue). The price failed to break the neckline (black) and instead, broke the red line connecting the bottom of the head and the right shoulder. That line could also be considered a mid-term up trendline. That breakout and failed inverse Head and Shoulders formation, is a strong sell for position investors, which makes our view on BASF negative.